Let them eat cake! Better still, let them bake their own cakes

IN our world we have Right and Left. We have Labour and Conservatives in the UK. In America it’s Republicans and Democrats. In practically every other country in the world, there are opposing political ideologies which struggle and strain to gain the upper hand.

I won’t go into the rights and wrongs or what some politicians do to make themselves rich. All that is just part of everyday life.

But what is the single most important thing that the man in the street wants? He wants enough to live on.

The problem is people fight (literally) over the best way to do this. The Left in general believes you should take as much as possible away from everyone and redistribute it. Creating tied estates of burgeoning pen-pushers is a great way to stay in power, even though nothing improves much.

Throughout a large part of the pre and post war years, governments just assumed that the best thing was for them (the government) to dictate how everything should be done. Think of the New Deal in 1930s America, of exchange control, central planning and so on in the West. In the East, the USSR dominated everything and exported its brand of Socialism and five year plans with unattainable targets right across the globe.

Throughout all these years Milton Friedman preached a different way. To a genuine economist, what he said was self-evidently true. What could be wrong with sound money? Every intervention either through trade barriers and tariffs, onerous regulation, price controls and quotas were very much his target.

These things distorted and ruined the proper allocation of resources. There is a perfect example of quotas at the moment which threatens to destroy the European car industry – quotas on electric vehicles. It may be our only option in a few years will be Chinese EVs. 

Flat taxes make the Laffer curve work perfectly, raising much more and with much less pain than the present cliff edges that exist in existing tax frameworks.

There is so much more that he dealt with but it was all perfectly logical and opposed by ideology – not by common sense. Two of his most important contributions are complete anathema to the so – called liberal elites.

The first is a negative income tax, which is simplicity itself to operate, but which hands control back to the individual.

The second is the entirely sensible idea that what does harm in the world of drugs is the fact that they are illegal. They could be regulated and taxed like other drugs (tobacco, alcohol) which would take control away from gangsters and raise millions for the state.

Friedman was in fact the world's leading exponent of personal and economic freedom, which, if you think about it, is what we all strive for.

We are seeing the revolt of the little man (and that is not a denigratory description, it refers to the fact that the big men have kept him down for generations).

I have said before we are already, in most countries, now beyond the level at which taxes are supportable, and, like Prohibition in the States from 1920 to 1933, people are working to avoid taxes and massively distorting economies. The only thing that prohibition did was create the gangsters and corrupt politicians, police and law enforcement that has undermined society ever since.

Our masters, if we must categorise them, have fought back against letting us spend our own money, averring that they know how to do it better, which is perhaps the biggest lie of all.

Ralph Harris, who was  head of the Institute of Economic Affairs from 1957 to 1988 and founding chairman of the IEA put it perfectly.

“…stamp duty... is grit in the engine of the economy, a major disincentive to moving for a new job. By taxing house moves, you get fewer house moves. Tax jobs, you get fewer jobs. Tax investment and you get less investment.”

Stop taking money away from the people who earn it and watch the economy grow all on its own.

And don’t we all now know it. Rather than telling us to eat cake, let us get on and bake our own cakes.

PS As you may or may not know I am a Fellow of the Royal Economic Society. I was delighted as ever to receive a missive from them saying they are creating a new tier of Fellow, which will recognise those that have contributed particularly to the science. These people will be entitled to use the following letters after their name: FREcon.

I really think they could have come up with a better name.‍